Telkom has reported a 1.1 percent drop in full-year revenue to R42.8 billion, blaming fierce competition and the fragile state of the economy for the disappointing performance.
Telkom announced a 2.5 percent increase in underlying headline earnings per share for the year ended March 31, 2022. Ebitda — a measure of operating profit – for the underlying group declined by 0.5 percent.
Active mobile users increased by 10.5 percent to 16.9 million, cementing Telkom’s third-place position in the market after Vodacom and MTN (and ahead of Cell C). The growth in the mobile segment, on the other hand, highlights how poorly the rest of the company has performed.
In the whole year, growth in the mobile business was offset by declines in the fixed-line and IT sectors.
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Despite a “very competitive market and hard economic environment,” mobile revenue increased by 6.3 percent.
“Our prepaid subscriber base increased by 12% to 14.3 million, with Arpus (average revenue per user) returning to pre-Covid-19 levels, as expected by management,” Telkom added. “The post-paid base grew by 3.4 percent to 2.7 million, while Arpus levels remained high at R212.”
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Telkom expects mobile revenue to continue to decline, with future growth “in line” with its industry peers, according to the company.
Telkom Sliding
In the whole year, growth in the mobile business was offset by declines in the fixed-line and IT sectors.
“While the top-line of these businesses declined compared to the prior year, the rate of decline improved compared to the first half of the year,” Telkom said. “The fixed business’s stability can be attributed to a decrease in fixed voice churn and an increase in usage as a result of stronger economic activity compared to the previous year.”
The group Ebitda margin increased by 0.2 percentage points to 27.9% as a result of good operational cost control.
Openserve’s wholesale segment increased the number of households crossed by fibre by 52.7 percent and the number of homes connected by 38.4 percent. Despite the continuous drop of legacy copper ADSL subscribers, overall fixed broadband customers climbed for the first time in several years in the second half of the year.
“In the coming financial year, we expect Openserve to begin growing, boosting top-line growth,” Telkom added. “We expect group revenue to grow in the mid-single digits over the medium term, given the slowing in growth in the mobile business and the continued erosion in the legacy business.”
Swiftnet, Telkom’s masts, and tower business had a 4.4 percent growth in revenue to R 1.3 billion, because of portfolio commercialization, new tower installations, and the roll-out of in-building solutions. After Telkom chose to postpone the listing in March, there has been no word on a separate Swiftnet listing.
Telkom blamed the “lingering impact of the lockout and worldwide supply-chain restrictions and semiconductor chip shortages” for the poor performance of its IT services company BCX. However, “excellent growth stemming from investments in new capabilities, progress made with key programs, and revived activity in the market” was seen in the second half of the year.
The IT segment weighed heavily on BCX’s sales, which fell by 2.6 percent. However, compared to the 6.1 percent revenue decline announced in the first half of the year, this was a significant improvement. “The improved performance exhibited across the business in the last quarter indicates a more favorable picture for the next financial year,” Telkom added.
“The R1.1-billion capex overhang from last year capex that was settled in the current year, revenue drop, and working capital movements all contributed to the decline in underlying free cash flow.”
There was no dividend announced, but Telkom stated that it plans to reintroduce the dividend at the end of the 2023 fiscal year if it can achieve “sustained positive free cash flow.”
The group’s free cash flow was negative by R2.1 billion, owing primarily to the R1.1 billion spent on radio frequency spectrum. Even after adjusting for this impact, underlying free cash flow was still negative at R938 million.
About Telecom
Telecommunications, also known as telecom, is the electronic transmission of information over long distances. It includes all types of voice, data, and video transmission. Wired phones, mobile devices, such as cellphones, microwave communications, fiber optics, satellites, radio and television broadcasts, the internet, and telegraphs are all examples of this broad word.
Two stations, each equipped with a transmitter and a receiver, make up a full telecommunications circuit. Any station’s transmitter and receiver can be merged into a single device known as a transceiver. Electrical wire or cable (commonly known as copper), optical fiber, electromagnetic fields, or light can all be used to transmit signals. Wireless communications refers to the transmission and receipt of data in free space using electromagnetic fields.